Portugal continues to grow in popularity as a destination for international hiring. Its competitive labor costs, business-friendly environment, and strong education system make it ideal for companies looking to build distributed teams across Europe. 

Whether you’re hiring one remote employee in Portugal or setting up a regional presence, Portugal offers a skilled, english-proficient workforce and clear labor regulations that support both employers and workers. Therefore, if you’re considering hiring in Portugal, it’s important to understand the local legal and administrative landscape. 

This guide outlines everything you need to know about hiring employees in Portugal. It covers employment law, hiring methods, payroll, taxes, visas, and employee benefits, whether you’re hiring one remote worker or building a full team.

Let’s dive in!

How to Hire Employees in Portugal

Employers can hire workers in Portugal through one of the following three approaches, each offering different levels of control, cost, and administrative responsibility. The right choice will depend on your business goals, how quickly you want to hire, and whether you plan to establish a long-term presence in the country. 

Below, we break down the key characteristics of each hiring model to help you determine the best fit for your expansion strategy.

Setting Up a Local Entity

Establishing a Portuguese legal entity gives your business complete hiring control, but it also comes with substantial commitments. You’ll need to register with local tax and social security authorities, appoint local representatives, open a corporate bank account, and maintain ongoing compliance with Portuguese corporate and labor laws.

We believe this route is best suited for businesses with plans to engage in long-term business in the country.

Working with an Employer of Record (EOR)

An EOR acts as the legal employer on your behalf. They take care of employment contracts, payroll, tax deductions, social security contributions, and benefit administration, all while ensuring full legal compliance with Portuguese regulations.

This option is particularly valuable for companies that want to hire quickly without going through the complexity of setting up a branch or subsidiary.

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Hiring Independent Contractors

Contracting local freelancers offers flexibility and lower administrative overhead. However, Portuguese authorities are strict about worker classification. If the contractor operates under similar conditions to a full-time employee (e.g. fixed hours, company-provided tools), the relationship may be considered disguised employment, which can result in penalties or back payments.

Start hiring with a Portugal EOR

Let us handle the complexities of hiring, compliance, and payroll in Portugal while you focus on growing your team.

  • Hire employees in Portugal with a Portugal EOR
  • No local entity is needed
  • Pricing starts at USD 199 per employee
  • Remote People can also help you find the best talent in Portugal
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Using an Employer of Record in Portugal

While we’ve already introduced the role of an EOR, it’s worth diving deeper into the full range of services it provides. 

Working with an Employer of Record (EOR) is one of the most efficient ways to hire employees in Portugal without setting up a local entity. The EOR acts as the legal employer on paper, taking on full responsibility for compliance with Portuguese labor laws, tax regulations, and employee benefits, while you retain control over your team’s daily tasks, performance, and company culture.

This model is especially useful for companies looking to enter the Portuguese market quickly, test new roles or regions, or scale their workforce without committing to the time and cost of establishing a subsidiary.

An EOR in Portugal typically manages:

  • Employment Contracts: Drafting and signing locally compliant contracts that reflect the required terms under Portuguese labor law and any relevant collective agreements.
  • Payroll and Salary Payments: Running payroll on a monthly basis, paying employees accurately and on time in euros, and providing payslips that meet local reporting requirements.
  • Tax Withholding and Social Contributions: Calculating, withholding, and remitting income tax, social security contributions, and other mandatory deductions to the Portuguese authorities.
  • Onboarding and Documentation: Managing the administrative tasks of onboarding, including employment registration, work permit applications (if required), and maintaining compliant records.
  • Benefits Administration: Providing mandatory benefits such as health coverage, paid holidays, and parental leave. Many EORs can also support additional perks like private health insurance or meal allowances.

By handling the administrative and legal workload, an EOR allows you to focus on managing your team and growing your business, without getting bogged down by unfamiliar legal requirements or local HR complexities.

How Much Does a Portugal Employer of Record Cost?

The cost of using an Employer of Record (EOR) in Portugal can vary depending on the size of your team, the level of service you need, and how customized the support is. On average, you can expect to pay between €500 and €1,200 per employee per month.

Most Portugal EOR providers charge a simple monthly fee that covers essentials like payroll management, tax compliance, benefits administration, and HR support. Some may also charge a one-time onboarding fee to set up contracts and register employees properly with Portuguese authorities.

If you’re looking for additional services, like help with visa sponsorships, custom benefits packages, or more hands-on HR consulting, those might come at a slightly higher rate.

While the monthly costs add up over time, partnering with an EOR often saves businesses money compared to setting up a full Portuguese entity, dealing with legal filings, and hiring an in-house HR and payroll team from scratch.

Employment and Labor Laws in Portugal

Portugal has robust labor laws designed to protect employees, and compliance is essential for avoiding penalties and ensuring smooth operations.

Employment Contracts

All employees must receive a written contract, which should include:

  • Job title and professional category
  • Salary and benefits package
  • Work location and schedule
  • Start date and contract duration (if temporary)
  • Holiday entitlement
  • Terms for notice and termination

Contracts may be indefinite or fixed-term, and many industries are subject to collective bargaining agreements that affect employment terms.

Working Hours

The standard workweek is 40 hours, usually split across five 8-hour days. Employees must have a daily rest period of 11 hours and a break if working more than 5 consecutive hours.

Overtime

Overtime RulesDetails
Maximum Allowable Overtime2 extra hours per day, up to 150–200 hours per year
Weekday Overtime Pay125% for the first hour, 137.5% thereafter
Public Holiday or Rest Day Work150% pay
Alternative to Overtime PayCompensatory rest may be offered instead of extra pay

Overtime laws vary slightly depending on company size and sector agreements.

Payroll and Employer Contributions

When a company works with an EOR, the EOR is responsible for compliance with all of Portugal’s labor laws. At the same time, it’s still useful for companies to be aware of major rules from Portugal’s constitution and Labor Code. This way, they’ll know how they will have to treat Portuguese workers and the sorts of benefits that those workers will expect. Some important rules include:

Payroll Cycle

Employees are typically paid a monthly salary, and payments must be made in euros through a Portuguese bank account.

Minimum Wage

As of 2025, the national minimum wage in mainland Portugal is €870 per month. Higher rates apply in Madeira and the Azores. All full-time workers must receive at least this amount, and the rate is set to gradually rise to €1,020 per month by 2028.

Part-time workers receive wages proportionally, and even interns and trainees may be subject to minimum wage requirements, depending on their employment status.

Employer Tax Contributions

Contribution TypeDescription / Rate
Social Security Contributions23.75% of gross salary
Work Accident InsuranceEmployer-funded (rate may vary by risk level)
Work Compensation Fund ContributionsEmployer-funded

Employee Payroll Contributions

Employees contribute 11% of gross salary to Social Security. Income tax (IRS) is withheld by the employer and submitted monthly. The IRS rate is progressive, ranging from 14.5% to 48%, based on salary and family situation.

Employers must file all taxes and social contributions by the 20th of the following month. Mistakes or late filings can lead to fines or legal liability.

Work Permits and Visas in Portugal

Non-EU/EEA nationals need valid work authorization to be employed in Portugal. The type of visa depends on the role, contract length, and qualifications.

To hire a non-EU or non-EEA national, employers must help secure the appropriate work permit. The most common permits include:

Temporary Residence Visa for Work

For employment lasting over 90 days.

Short-Term Work Visa

For temporary or seasonal roles under 90 days.

Tech Visa (Highly Qualified Activity)

For skilled workers in technology or engineering.

EU Blue Card

For non-EU citizens with high salaries and advanced qualifications.

Digital Nomad Visa

For remote employees working for foreign companies.

Employers must provide a job offer and supporting documentation. Processing can take 1–3 months. Employees cannot begin work until their permit is approved.

Time Off and Leave in Portugal

Annual Leave

Employees in Portugal are entitled to a minimum of 22 paid working days of annual vacation per year, in addition to public holidays. This leave is mandatory and cannot be replaced with monetary compensation, except in cases of contract termination. 

During the first year of employment, leave is accrued at a rate of 2 working days per completed month, up to a maximum of 20 days. After the first year, employees are entitled to the full allowance, regardless of their start date within the calendar year. Employers may define specific periods for taking leave, but must consider employee preferences and business needs.

Public Holidays

Portugal recognizes 13 national public holidays, including New Year’s Day, Good Friday, Labour Day, and Christmas. In addition to these, regional and municipal holidays may apply, depending on the employee’s work location. These local holidays can add 1–2 additional paid days off per year. If employees are required to work on a public holiday, they are generally entitled to overtime pay or compensatory time off, depending on the employment contract or collective bargaining agreement.

Sick Leave

Employees who are unable to work due to illness or injury are entitled to paid sick leave, provided they have made sufficient contributions to Social Security.

Sick leave is covered by Social Security starting on the 4th day of absence and can be granted for up to 1,095 days (three years). The amount paid depends on the length of the absence, with benefits typically ranging from 55% to 75% of the employee’s salary.

A doctor’s certificate is required, and the employer must notify Social Security within five working days.

Family and Parental Leave

Portugal offers generous leave provisions for parents and families:

  • Maternity Leave: Minimum of 120 consecutive days, paid by Social Security. This can be extended to 150 days if shared with the father.
  • Paternity Leave: 20 mandatory working days, which must be taken within the first six weeks of the child’s birth. An additional 5 optional days can be used, paid and funded by Social Security.
  • Parental Leave: Parents can request unpaid extended parental leave for up to 3 years following the birth or adoption of a child. This leave may be taken all at once or in intermittent blocks.
  • Bereavement Leave: A minimum of 2 consecutive working days is granted following the death of a close family member.
  • Marriage Leave: Employees are entitled to 15 calendar days of paid leave upon marriage.

All leave must be supported by appropriate documentation, and in some cases, advance notice and employer approval may be required.

Employee Benefits in Portugal

Under Portuguese labor law, all employers must provide certain statutory benefits to employees. 

  • Social Security Coverage: Covers pensions, unemployment, parental leave, sick leave, and other social protections.
  • Paid Annual Leave and Public Holidays: A legal minimum of 22 vacation days, plus 13 national public holidays.
  • Parental and Family Leave Protections: As described above, covering both maternity and paternity entitlements.
  • Meal Allowance: While not legally required, meal subsidies are a widespread practice in Portugal and are often treated as a standard part of compensation packages. These can be offered as cash or through vouchers.
  • Work Accident Insurance: Employers must provide insurance to cover injuries or illnesses that occur in the course of employment.

Additional Employee Benefits to Consider

To attract and retain top talent, many employers go beyond the minimum requirements by offering key benefits:

  • Private Health, Dental, and Vision Insurance for employees and their dependents
  • Supplementary Pension Contributions beyond what Social Security provides
  • Meal or Fuel Vouchers, sometimes at tax-advantaged rates
  • Flexible or Hybrid Work Arrangements, which are increasingly popular in Portugal’s tech and services sectors
  • Mental Health Support or Wellness Programs, such as access to therapy sessions or gym memberships
  • Professional Development Budgets, including language courses, certifications, or training reimbursements

An Employer of Record (EOR) can assist in delivering both required and additional benefits, ensuring full alignment with local employment expectations and legal standards.

Terminations and Severance in Portugal

Ending an Employment Contract

In Portugal, employment relationships can be legally terminated in several ways. Common scenarios include:

  • Natural expiration of a fixed-term contract
  • Redundancy or business restructuring, including economic reasons
  • Dismissal for unsuitability or poor performance, where the employee fails to meet job expectations after proper evaluation and training
  • Disciplinary dismissal for just cause, such as gross misconduct or repeated violations of company policy

Regardless of the reason, termination must follow a formal legal process, which includes written notice, documentation of the cause, and in some cases, prior consultation with employee representatives.

Notice Periods

The length of notice depends on the employee’s tenure:

Length of EmploymentNotice Period
Less than 1 year15 days
1 to 5 years30 days
More than 5 years60 days

Employers can opt to provide payment in lieu of notice, as long as the legal conditions are met.

Severance Pay

When terminating employees due to redundancy or unsuitability, employers are typically required to provide severance pay, calculated as:

  • 12 days of base salary per year of service
  • Subject to a cap based on the employee’s total compensation and the legal framework in place at the time of contract initiation

Employees dismissed for wrongful termination are not entitled to severance, but the burden of proof is high, and terminations must be well-documented to hold up in court.

Working with an EOR can help ensure all termination procedures are compliant and handled with the appropriate documentation and timing.

Expand into Portugal Easily with Remote People’s Employer of Record in Portugal

Portugal is an excellent location for building a distributed remote team in Europe. With competitive labor costs, a well-educated workforce, and clear employment laws, it offers stability and flexibility for growing businesses.

Whether you’re hiring remotely or setting up operations locally, working with an Employer of Record can help you stay compliant, reduce administrative work, and create a smooth hiring experience for your team.

If you’re ready to hire in Portugal, contact Remote People today and find out how we can help you get started with confidence and ease.